Stein Mart grows conservatively

Twenty-two years ago, when vice chairman and ceo Jack Williams joined family-owned retailer Stein Mart, the chain had three stores — the original store in Greenville, MS, that had been there since almost the turn of the century, as well as stores in Memphis and Nashville.

But the route the retailer chose to get to where it is now — with 261 stores in 29 states and $1.3 billion in annual revenues — was methodic and slow, he said, which he compared to dipping one's toe into the water.

"We don't play games with money — ours or the stockholders," he said at the annual Retailing Smarter symposium at the University of Florida's David Miller Center for Retailing Education and Research. "Our company has always had a fiscally conservative mindset; when your roots are in a generations-old, family business, the Depression-era philosophy of frugality and savings still dominates."

Since Stein Mart was always "debt-averse," he said, the company decided early on that store revenue would be the resource for growth. "At the height of the Wall Street deals era, I'm sure we looked like hopeless hayseeds, but today, plenty of companies who made those deals are no longer around, and we are."

During the 1980s, the retailer opened a few more locations each year, looking at bargain locations in close proximity to upscale residential neighborhoods, he said, instead of regional malls or heavily trafficked corners, where rents would be high. "We were the commercial equivalent of the residential real estate adage to buy the smallest house in the nicest neighborhood." The company pursued store growth more aggressively in the 1990s, when it had the chance to take the company public, and expanded its real estate search to include more metropolitan markets, as well as multiple stores in a market.

Williams said that analysts who follow Stein Mart are puzzled as to why it doesn't follow a more aggressive growth style, such as that of Kohl's, which opens a number of stores in a market at the same time. But Williams said how a company expands should reflect its own capital needs and resources as well as its own organizational culture, which he called "growing at the 'speed of right.' "

Part of Stein Mart's success is due to its people, he said, and also because Stein Mart offers compelling and consistent merchandise. The retailer now buys a majority of its assortment at the same time as department stores, he said. And since the merchandise is usually delivered later than the larger department stores, Stein Mart opted long ago to drop-ship the merchandise directly to the stores, rather than to a distribution center. That method may not be in vogue and it requires intensive investment, he said, but the merchandise gets on the floor faster.

The company also resisted selling merchandise online when retailers were told that they needed to add "clicks" to their "bricks," he said, but now it seems that "successful, profitable apparel retailing on the Internet is still in the future."

"We've had our up years and our down years, but we have never had a losing year, And we never had the same number of stores at the end of the year that we did in the beginning," he said.